Forever 21 Is Getting Good at Bankruptcy

Forever 21 has filed for bankruptcy protection for a second time as traffic in US shopping malls fades and competition from online retailers like Amazon, Temu, and Shein intensifies. F21 OpCo, which runs Forever 21 stores, said late Sunday that it will wind down the business in the US under Chapter 11 bankruptcy protection while determining if it can continue as a business with a partner, or if it will sell some or all of its assets. "While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin," Chief Financial Officer Brad Sell said in a statement.

The de minimis tax exemption lets shipments headed to US businesses and consumers valued at less than $800 enter the country tax-free and duty-free, reports the AP. Forever 21 stores in the US will hold liquidation sales and the website will continue to run while operations wind down. The retailer's locations outside the US are run by other licensees and are not included in the bankruptcy filing. International store locations and websites will continue operating as normal. Authentic Brands Group owns the international intellectual property associated with the Forever 21 brand and may license the brand to other operators, F21OpCo said.

Forever 21 first filed for bankruptcy protection in 2019. It was acquired by a consortium of parties including Authentic Brands Group and mall owners Simon Property Group and Brookfield Property Partners. Forever 21 was founded in 1984 and rode a wave of popularity among young customers in the mid-1990s, with popularity growing during the Great Recession, as shoppers sought bargains. But Forever 21 went on an aggressive expansion just as shoppers were moving more online. Neil Saunders, managing director of GlobalData, said that part of the problem now is that Forever 21's stores are too big for its current needs and in malls with not enough foot traffic. "Forever 21 was always a retailer living on borrowed time," he said.

(More Forever 21 stories.)